Business context and reporting period
The supplied filing is Original Source Entertainment, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2012—not a filing identified in its text as NeuroOne Medical Technologies Corp. Original Source describes itself as a development-stage company planning to license songs for television and film use.
Financial results and position
- Revenue: $147, compared with $3,071 in Q1 2011. Cost of sales was zero, so reported gross profit was $147.
- Operating expenses and earnings: General and administrative expense was $5,666, down from $9,733. Operating loss was $5,519; interest expense was $55 in the statements, and net loss was $5,574, versus a $6,692 net loss a year earlier. Basic and diluted loss per share was reported as $0.00.
- Cash flow: Operating cash use was $5,519; there was no investing or financing cash flow during the quarter. Cash fell from $13,851 at December 31, 2011 to $8,332 at March 31, 2012.
- Liquidity and debt: Current liabilities were $4,628, including $3,500 of current notes payable. Long-term notes payable were $12,500. Total liabilities were $17,128 and stockholders’ equity was negative $3,277. The balance sheet implies positive working capital of $3,704, although management states that the company had a working-capital deficiency.
- Margins: Gross margin was 100% based on reported revenue and zero cost of sales; the filing provides no separate operating or net margin percentages.
Material changes versus the prior comparable period
Revenue declined by $2,924, while general and administrative expense fell by $4,067. The net loss narrowed by $1,118. Cash decreased by $5,519 during the quarter; notes payable balances were unchanged from year-end.
Outlook, risks, contingencies, and unusual items
Management expects continuing losses and negative operating cash flows and says additional debt or equity financing will be needed. It cannot assure financing will be available on acceptable terms. The filing identifies substantial doubt about the company’s ability to continue as a going concern; the financial statements contain no adjustments for the outcome of that uncertainty. No material capital commitments, off-balance-sheet arrangements, contractual obligations, or legal proceedings were reported. Management said it was seeking to reduce overhead and reported no material operating trends or uncertainties, while cautioning that forward-looking statements are subject to risk.
Important facts for investors to verify
- Confirm the issuer: the provided filing names Original Source Entertainment, Inc., not NeuroOne Medical Technologies Corp.
- Reconcile the stated working-capital deficiency with the balance-sheet amounts, which imply positive working capital of $3,704.
- Reconcile the MD&A’s description of quarterly net loss as $5,519 with the income statement’s $5,574 net loss; $5,519 matches the reported operating loss and operating cash use.
- Assess the company’s ability to obtain financing and fund operations given its going-concern warning, limited cash, and recurring losses.